American Chief Criticizes Ruling

DAVID KOENIG

Published 8:00 pm, Thursday, January 31, 2002

AP Business Writer

American Airlines chairman and chief executive Donald J. Carty blasted a U.S. government ruling that effectively blocked an alliance with British Airways, saying it had prevented more competition in the airline industry.

Carty on Friday accused regulators of punishing American by rejecting its alliance after approving three similar deals between U.S. and European carriers.

Last week, the Transportation Department said it would let American and British Airways jointly set fares and routes across the Atlantic only if they surrendered 224 weekly takeoff and landing slots for travel between London's Heathrow Airport and U.S. cities.

American and British Airways said they would not accept those terms, which Carty said would wipe out all of American's slots for its 16 daily round trips between the U.S. and Heathrow.

"We believe strongly that the conditions proposed by the Department … are arbitrary, capricious and inconsistent with the very antitrust principles cited by the Department in support of them," Carty said in a letter to Transportation Secretary Norman Mineta.

A spokesman said the department would not comment because it could still change its ruling in the next month.

Carty acknowledged that his objections may be futile but expressed them anyway because "for us it was like getting hit by a two-by-four."

Carty said there is already "substantial competition" at Heathrow. Besides American and British Airways, only two other carriers _ United Airlines and Virgin Atlantic _ fly between Heathrow and the United States, and others are eager to gain a foothold.

The Transportation Department's plan for American-British Airways would have opened Heathrow slots for Continental, Delta, Northwest and US Airways.

Jon Ash, an industry consultant in Washington, said that made it hard for the Transportation Department to change its ruling.

"The department has allocated those (Heathrow) slots to other carriers," Ash said. "Having fed the dogs, you can't take the food out of the dish. They'll bite your hand off."

Delta, Northwest and Continental sought to prevent any possibility of reviving the American-British Airways deal by asking the Transportation Department late Thursday to dismiss the alliance proposal.

American and British Airways have tried twice in the past five years to create an alliance under which they could sell each other's tickets. Their first effort was abandoned in 1999 when regulators also insisted that the carriers give up slots at Heathrow.

In trading Friday on the New York Stock Exchange, shares of American's parent AMR Corp. fell 82 cents to $24.12; Delta shares lost 20 cents to $31.31, and Continental shares fell 53 cents to $28.61.